In the build-to-rent world, certain subjects will always be a hot topic: renter trends, capital investment, and market growth projections. But another subject is also prompting in-depth conversations among property managers and builders.
“Should we insource or outsource when it comes to investing in property technology and other support solutions?”
Good question considering by the end of 2022, the number of proptech providers grew 29% year over year to exceed 2,200 companies. Within the next six years, analysts expect the proptech market to approach a valuation of $100 billion. That number does not include the other vendor partners supporting the everyday functions of builders and property managers.
[Want to learn more about the proptech industry and innovations shaking up property management? Download Five Trends in SFR management for 2024 to take a deeper dive.]
To say there are options is an understatement. But outsourcing might not be right for everyone. Choosing between keeping tasks in-house or trusting them to external partners is about more than convenience. The decision represents a strategic move with a big impact on operational efficiency, long-term growth, and bottom-line management. Getting it right is important.
The value of insourcing or outsourcing depends on the unique needs of each company. There is no one good answer. Fortunately, there are good questions to help decide which option works best.
What problem do we need to solve?
The first step is clearly defining the problem or opportunity. Maybe you want to reduce staff costs, refocus the business, scale quickly, fend off competition, or improve service. The problem and the priority of solving it will impact the timing, budget, and resources needed. These are three key focus areas for deciding between insourcing and outsourcing.
Do we have the time and talent?
If you have in-house staff with the knowledge and skill to fix the problem or capitalize on an opportunity, they probably already have an existing workload. Insourcing likely means reallocating those tasks elsewhere within the organization or reducing what gets done. Recruiting talent to insource a project increases payroll and benefit expenses, while also requiring extra time. Outsourcing projects typically provide for a quicker ramp-up with ready-to-go, highly skilled staff already on board. However, in-house staff understand the business, the brand, and the values of the company. They have deep institutional knowledge and already grasp critical business operations. An outsourced provider may need time to get up to speed.
Can we give up control?
This is a big one. Outsourcing means trusting a third party and relying on them to deliver the same or superior quality than your own team. Going outside may mean sharing intellectual property and data, so security needs to be strength. Partnering with a vendor such as a SaaS-based technology provider means conforming to their solution with potentially limited ability for the tech to meet every nuance of your business. Keeping things in-house requires more management and upkeep, but your company controls every process, piece of data, and platform update.
What could we be doing instead?
Every project has an opportunity cost. Are things like developing new technology, performing maintenance, and managing warranty claims part of the core business? If not, are they taking away focus from more important, profitable activities? Outsourcing allows companies to focus their available in-house resources on the tasks most critical to the everyday operation.
As an example, a property management company, under pressure from investors to raise rents, outsourced tenant maintenance to a third party. The move made its highly skilled staff of technicians available to focus on long-term property improvements that would warrant higher fees.
Who do we need to be 12-60 months from now?
What is coming down the pike within the next five years that will change your business? Perhaps the company wants to double in size, expand its geographic footprint, or launch a new service. What resources are required to make those goals a reality? Insourcing offers greater control and innovation from unique business insights while outsourcing can fast-track deliverables for quicker scalability.
Preparing for the housing market bounce back, a builder invested in third-party technology to support virtual showings and digital design assistants. The move reduced the number of sales staff needed at build sites while also creating a sales pipeline of potential buyers who had interacted with the company online while designing their dream home.
Can we integrate?
Insourced or outsourced, the solution must work with the business. A research study found technology workarounds can add as much as 10 hours to each employee’s workweek. Outsourced solutions must integrate with existing systems, staff, and workflows. Adding technology or other service providers to take on various tasks will fail if everything is siloed. Initial and ongoing staff training also needs to be a factor in determining if insourcing or outsourcing is the right decision.
What are the metrics for success?
Scope creep, competing priorities, and changing ideas all plague project management. As important as defining the problem is determining how to measure a solution’s success. Without clearly identifying the resolution needed, the intended return on investment, and the impact on the business, knowing whether to insource or outsource is impossible. No one understands the measuring stick.
One property management company, focused on expanding to new markets, conducted a tenant satisfaction survey. They found that maintenance had become a major issue. Slow response times had renters complaining online, making repairs themselves, and not renewing leases. The company defined the improvements needed: responses in 24 hours, fixes within 5 days, and follow-up reviews to ensure quality. The company used these three metrics to determine if in-house staff were up to the job or if a third-party provider could improve service better. Defining success became a key part of the decision-making process.
Partner with PWSC
Outsourcing means relying on a third party to care as much about your business as you do. No warranty provider brings more to the table than PWSC. From best-in-class home warranties, to white glove claims administration, and more than 100 years of in-house construction and real estate expertise, PWSC is the partner leading builders and property managers trust. Our pursuit of excellence in mitigating risk and maximizing client satisfaction is unmatched. Learn more to discover why PWSC is the home expert.
